CAN ORDER BE ISSUED WITHOUT PROVIDING THE SCN

Analysis of Case Study : Yash Building Material vs. State of Uttar Pradesh

Facts of the Case:

1. Notice Received: Yash Building Material (referred to as “the Petitioner”) received a notice on June 4, 2021, under Section 74(5) of the CGST Act, stating tax was payable.
2. Legal Requirement: As per Section 74(7) of the CGST Act, if tax remains unpaid after such a notice, an SCN under Section 74(1) of the UPGST Act must be issued by the proper officer.
3. Proceedings: Instead of issuing the required SCN, the Assistant Commissioner passed an order on July 30, 2021 (“the Impugned Order”), followed by an order by the Additional Commissioner on August 31, 2022.

Issues Raised:

• Non-Issuance of SCN: The Petitioner contested that no SCN was issued as required under Section 74(1) of the UPGST Act before passing the demand orders.

Court’s Findings and Judgment:

1. Legal Requirement Emphasized: The Allahabad High Court emphasized that under Section 74 of the CGST Act, an SCN is mandatory before issuing demand orders related to tax liabilities.
2. Invalidity of Orders: Since no SCN was served to the Petitioner, the Court concluded that the Impugned Orders lacked a legal basis. Therefore, the Court quashed the orders dated July 30, 2021, and August 31, 2022.
3. Directive for Future: The Court directed the tax authorities to follow the correct procedure by issuing a proper SCN under Section 74(1) of the UPGST Act before proceeding further. This ensures fairness and adherence to natural justice principles.

Legal Principles Emphasized:

• Natural Justice: The judgment underscores the importance of natural justice principles in tax proceedings. Taxpayers have the right to be informed, heard, and respond to allegations before any adverse orders are passed.
• Precedential Value: This decision establishes a legal precedent that demand orders issued without prior SCN are unsustainable and can be challenged effectively.

Conclusion: The Yash Building Material case highlights the critical procedural requirements under GST laws and the judiciary’s role in upholding taxpayer rights. It ensures that tax authorities must strictly adhere to statutory provisions to maintain fairness and legality in tax administration.

Simplified Explanation with Example: Imagine Yash Building Material received a notice stating they owed taxes, but the tax authorities skipped the step of issuing a formal notice allowing them to respond before making a final decision. In court, Yash Building Material argued that this violated their right to a fair hearing. The Allahabad High Court agreed, saying tax authorities must follow the proper steps to notify taxpayers and allow them a chance to respond before taking action. This decision ensures that future tax demands must always be preceded by such a notice, ensuring fairness in how tax matters are handled under the law.